We focus on investing selectively in a limited number of middle-market, service-based companies with the potential for growth.
What sets us apart is our definition of investing. We provide more than capital. We add value. Lake Capital was founded on the belief that growing businesses need more than capital to achieve their full potential. The firm's founders and other key Lake Capital professionals began their careers as entrepreneurs and business operators.
Our principals have decades of experience in creating, leading, and managing successful service-based companies. We leverage that experience to enhance efficiency and performance and to pursue growth while continuing to enable a company's management team to lead the business on a day-to-day basis. Because we have been in the chair of those with whom we seek to partner, active support of our management partners in developing and executing growth strategies is our hallmark.
Service-based businesses currently account for more than 40 percent of the U.S. Gross Domestic Product. We believe service-based businesses offer outstanding potential for capital appreciation. Among the areas we target:
We draw on a network of key relationships with bankers, business owners, accountants, attorneys, and many other referral sources to identify investment opportunities.
Typically, opportunities fall into three categories:
We conduct rigorous industry research and due diligence with regard to management, growth prospects, competition, and past and potential financial performance. We look for:
We understand the importance of aligning the interests of the sellers and managers of portfolio companies with the interests of Lake Capital and its investors. We structure transactions in ways that motivate key people to remain committed, protect client relationships and set the stage for organic and acquisition-driven growth.
We typically allocate $50 million or more of equity to each portfolio company initiative. Typically, a portion of the allocation goes into the initial transaction to acquire a base "platform," leaving a substantial amount of additional equity capital to carry out an organically and acquisitions-driven growth strategy. In addition, with seller financing, third-party debt, and co-investment opportunities, significant capital in addition to the initial equity allocation is available to each initiative. In fact, we have allocated equity well in excess of $100 million to several initiatives.
Our hallmark: active support
We work actively with the management of our portfolio companies, and our management partners have found us to be informed, involved and interested, without being intrusive. We interact with our executives every week, not just at quarterly board meetings. Our frequent interaction, combined with our own experiences sitting in the chair of the entrepreneur and business operator, allows us to work effectively with our executive partners. We focus on measurability and accountability for everyone involved, including us.
We also provide resources that might not otherwise have been available. Our Portfolio Company Services Team is a unique group of in-house Lake professional resources with extensive experience managing finance and accounting, HR, operations, IT systems implementation and integration, marketing and communications, and business development and cross-selling, among other areas. Our team is able to work with you at the strategic level and then oversee the tactical implementation of the plan on a day-to-day basis, supplementing your own staff when necessary. We also generally perform acquisition-related activities for our portfolio companies, freeing management teams to focus on the day-to-day execution of their businesses.
Goals for companies in which we invest
We concentrate on a limited number of high-quality investments so we can give each portfolio company the attention and resources necessary to foster accelerated organic and acquisition-driven growth that can produce significant capital appreciation. We look to make 3-5 platform investments each year. For each company, we seek to: